Latest Research

By now it’s consensus that the Fed missed the ideal window for the first rate hike (if one ever existed) by at least a year and a half. We don’t disagree…

In the context of a low growth/low inflation environment, with the Fed taking its time to guide rates upward, fixed income type of investments may pale by comparison to dividend paying stocks.

The MTI fell deeper into bear territory during a horrendous market month. The 0.80 ratio is consistent with an ongoing primary bear market—and so are many of the moves by various MTI categories.

The transition we saw last year from a mostly Risk-On (or Easing) environment to a more challenging Tightening (or Risk-Off) environment has made the relationship especially volatile.

Despite the already strong performance over the last three years, this group has recession proof attributes, positive industry trends, and widespread areas of potential growth.

We are aware of the oversold condition in oil but we expect volatility to remain high in the near term. We maintain a defensive stance towards credits at this point.

We’ve been correctly positioned near our tactical portfolios’ equity minimums, yet we’re oddly compelled to use this month’s “Of Special Interest” section as a very public second-guessing of that move.

Among the bottom ranked sectors are Utilities, Materials, Energy, and Telecom Services. These four sectors have been the bottom four rated sectors for a minimum of eight months.

We maintain Neutral in light of persistent high volatility.

While most factors performed well during the January sell-off, those providing stability worked the best. Low Volatility, Profitability, and Size were notable outperformers.

The S&P Industrials’ downside to mean valuation (excludes Utilities and Financials) is 24%, about 3% less than last month’s reading.

Median YOY revenue growth figures for Q4 look awfully similar to the past few quarters—many market cap segments and sectors barely cling to positive readings. Market action is starting to take some of the fluff out of the LTM Price to Sales ratio.

Small Cap underperformance in January helped push our Ratio of Ratios into discount territory for the first time since the end of 2008.

Despite Growth lagging severely in the two smaller market cap segments, Large Cap Growth, the darling of 2015, was the best performer in the brutal month of January.

Although the volatility measures couldn’t match last August, the S&P 500 still managed to reach a new contemporary low of 1812 on January 20th. Our Equal Weighted Average has had just one monthly win since its relative strength peak in March of 2015.

Our AdvantHedge gross composite gained 9.9% in January, outpacing the inverse performance of the S&P 500 (-5.0%), NASDAQ (-7.8%), and Russell 2000 (-8.8%). AdvantHedge finished 2015 with a gain of 5.5% compared to the S&P 500 gain of 1.4%.

Select Industries gross composite lost 8.1% in January after finishing 2015 up 0.4%. The S&P 500 fell 5.0% in January and closed 2015 up 1.4%. Small Cap underperformance and rising correlations made January a tough month for our group work.  

Major Trend Index Negative: Net Equity Exposure Remains 38% - 39%

Based on data through last Friday, the Major Trend Index rose 0.07 points to a ratio of 0.80. It benefited from a huge jump (115-points) in the Attitudinal category and a solid gain in the Intrinsic Value work. Steady improvement in these countertrend categories, combined with deeply negative readings in the Momentum/Breadth/Divergence work, is characteristic of an ongoing cyclical bear market; the body of evidence suggests it’s still too early to hit a major low in equities.

The Major Trend Index fell 0.06 points to a ratio of 0.73, using last week’s data (week ended Friday, January 15th). Essentially all of our trend-following work is now confirming that a cyclical bear market is underway. In fact, the new closing low this week, on January 20th, confirmed our suspicion that the S&P 500 decline from its high close on November 3rd represented the second leg of the bear market decline from the bull market high May 21st.